TNAG-0237-FCO40-273-Trade-relations-between-EEC-and-Hong-Kong-1990 — Page 150

CONFIDENTIAL

13. Ernst took note of our figures and agreed that the

W

Commission would have to review its basic position in the light

of them. But he emphasised that it would be necessary to

restrict growth to modest bounds in order to buy French co-

operation in a liberal common policy. We expressed polite

cynicism at this last suggestion when, under pressure, Ernst

conceded he did not anticipate an overall Community total with

free circulation but a series of sub-totals for Member States

based on present trade patterns. Added to this (see para.17

below) was the fact that the administration of quotas would still

be negotiable with Member States; and that, as a first position

at least, Ernst envisaged an Article 4 agreement covering all

Hong Kong/EEC trade in cotton textiles and not merely the 80%

currently restrained. We therefore told Ernst that, far from

being an offer of "increased export opportunities and more

flexible conditions for the operation of bilateral arrangements",

as stated in the CTC document, this proposition sounded like an

even more restrictive arrangement than the status quo; and the

price of limited growth to buy French co-operation seemed a

singularly one-sided bargain. Ernst replied that the sort of

agreement he envisaged would be the first step along a new road

to a harmonised cotton textiles policy and that there would

thereafter be step by step improvements including, perhaps,

some possibility of "swing" between Member States' sub-limits.

The end result would be a uniform EEC administration of a total,

undivided, tolerable intake of cotton textiles with free circulation

within the Community. On the question of limits in general

Ernst expressed the opinion that, as time went on, it would become

more and more difficult to obtain any compromise with France on

Hong Kong because the quantities involved were continuously

diverging.

He implied that now, when the business situation was

good, was the best time for Hong Kong to take the plunge of an

arrangement with the Cmmunity as a whole.

CONFIDENTIAL

/Flexibility

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